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Direct Marketing to a Network of Consumers

26 Pages Posted: 14 Jan 2011 Last revised: 19 Dec 2011

James David Campbell

Providence College

Date Written: December 18, 2011

Abstract

This paper considers duopolistic firms targeting informative messages to consumers who share information locally with their neighbors in the network graph. A monopolist targets efficiently by sending messages to a parsimonious set of nodes that leave the whole population informed either directly or by word-of-mouth. A duopolist faces a tradeoff between this efficient targeting and possible preemption by a competitor's message. Under gentle price competition, duopolists saturate the network when sending messages is cheap, and target sets similar to the monopolist's when sending messages is costly. Under fierce price competition, duopolists' messages divide the network in an intermingled patchwork segmentation.

Keywords: word-of-mouth, oligopoly, social networks, direct marketing

JEL Classification: D83, D85, L13, M31

Suggested Citation

Campbell, James David, Direct Marketing to a Network of Consumers (December 18, 2011). Available at SSRN: https://ssrn.com/abstract=1739294 or http://dx.doi.org/10.2139/ssrn.1739294

James David Campbell (Contact Author)

Providence College ( email )

United States

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